Talk to Us About Our Educational Savings Plans

As parents and grandparents, we want to provide our children with the brightest possible future. Education savings plans from State Farm® can help. Both the federal and state governments have made it easier to save for college. There are tax-favored choices that can help put a college education within reach.

Coverdell Education Savings Account (ESA)

The Coverdell ESA was created as an incentive to help parents and students save for education expenses.

The total contributions for the beneficiary of this account cannot be more than $2000, in any year, no matter how many accounts have been established.

Contributions to a Coverdell ESA are not tax-deductible, but amounts deposited in the account grow tax free until distributed.

State Farm College Savings (529)

The State Farm College Savings Plan is an education savings plan, sponsored by the State of Nebraska, designed to help families set aside funds for future college costs. It is named after Section 529 of the Internal Revenue Code which introduced these types of savings plans in 1996.

Our plan can be used to meet qualified expenses at most colleges nationwide. Your choice of school is not affected by the fact our plan is sponsored by the State of Nebraska.

UGMA/UTMA Accounts

UGMA and UTMA accounts allow you to invest for a child's future while taking advantage of the child's potentially lower tax rate.

While UGMA and UTMA accounts are not specifically designed to provide financing for college, many parents and grandparents use them for this purpose because the assets become available to the child when he or she reaches the age of majority specified under the state's UGMA or UTMA law.

The Coverdell ESA is a trust or custodial account that provides individuals a tax-advantaged method to save up to $2,000 per year for a child's education — both elementary/ secondary education (kindergarten through grade 12) and post-secondary education (college, graduate school, vocational school, etc.) — and may be established for the benefit of any child under age 18.

The State Farm College Savings Plan is a qualified tuition plan operated according to section 529 of the Internal Revenue Code, The State Farm College Savings Plan, sponsored by the State of Nebraska, helps make college investing simple, affordable, and convenient.

An account can be established for a child under the Uniform Gift to Minors Act (UGMA) or the Uniform Transfer to Minors Act (UTMA), depending on which law applies in the relevant jurisdiction. The UGMA/UTMA account allows someone to make gifts or transfers of property to a minor without setting up a trust. The transfers made to an account of this type are considered an irrevocable transfer to the minor in whose name the account is registered.

Contribution Limit

Up to $2,000, per child (under age 18) can be made by contributors with a modified adjusted gross income of no more than $190,000 if filing jointly or $95,000 for single filers. The maximum is reduced and gradually phased out for those with a modified adjusted gross income between $190,000 and $220,000 (joint filers) or between $95,000 and $110,000 (single filers). Those who exceed these income limits are not eligible to make contributions.

The contribution limit varies by state or institution (a plan cannot accept contributions that exceed the amount necessary to provide for the beneficiary's qualified expenses.) For State of Nebraska plans, the total balance of all accounts for the same designated beneficiary cannot exceed $360,000, regardless of the account owner(s).

None

Financial Aid Impact

The Coverdell ESA is treated as an asset of the account owner. If the account owner is the student, this has a high impact on financial aid eligibility.

How the plan might affect financial aid depends on whether it is owned by the student or the parent. Please see the FinAid website for more specific information.

For financial aid purposes, custodial accounts are considered assets of the student. This means there is a high impact on financial aid eligibility.

Tax Treatment

Tax-deferred growth.

Earnings are free from federal (and possibly state) income taxes.

Since 2008, the first $900 of a child's investment income is tax free and the next $900 is taxed at his or her own rate, but any unearned income in excess of $1,800 is taxed at the parents' presumably higher tax rate.

Earnings are tax free if used for eligible education expenses, which include room and board, tuition, books, supplies and equipment, academic tutoring, and special needs services.

Withdrawals are federal-income-tax-free if used for qualified higher education expenses.

There are potential gift tax and estate tax savings.

In 2008, the kiddie tax was expanded to include dependents under 19 and dependent full-time students under 24. Children who provide more than half of their own support are not affected by this kiddie tax change.

The availability of such tax or other benefits may depend on meeting certain requirements.

Risk Disclosures

State Farm College Savings Plan (529) Disclosures

Before investing, consider the investment objectives, risks, fees and expenses associated with The State Farm College Savings Plan. Contact State Farm VP Management Corp (800-447-4930) for an Enrollment Handbook and Participation Agreement containing this and other information. Read it carefully.

An investor should consider, before investing, whether the investor's or designated beneficiary's home state offers any state tax or other benefits that are only available for investments in such state's qualified tuition program.

Earnings must be used to pay for qualified higher education expenses to be federally tax free. The earnings portion of a non-qualified withdrawal will be subject to ordinary income tax at the recipient's marginal rate and subject to a 10% penalty. State Farm does not provide tax advice. Please consult your tax advisor for specific information about your tax situation, including any state tax consequences of an investment. The availability of such tax or other benefits may be conditioned on meeting certain requirements.

A $70,000 gift is viewed as an accelerated gift over five years. Any other gifts to the same beneficiary by the contributor in that tax year or in any of the succeeding four years may result in a federal gift-tax liability. If the contributor dies within the five-year period, a prorated portion of the contribution may be included in his or her taxable estate.

Contributions can be made until the value or total amount of contributions across all Nebraska program accounts for the beneficiary reaches $360,000. Accounts in excess of this limit can continue to grow through investment earnings realized by the plan, but no additional contributions can be accepted above that limit. This limit is set by the Nebraska State Treasurer and is subject to change.

The plan is intended to operate as a qualified tuition program, pursuant to section 529 of the U.S. Internal Revenue Code.

Participation in the plan does not guarantee that contributions and the investment earnings, if any, will be adequate to cover future tuition and other higher education expenses, or that a beneficiary will be admitted to or permitted to continue to attend an eligible educational institution.

This material is not an offer to sell or a solicitation of an offer to buy any securities. Any offer to sell shares within the plan may only be made by the Enrollment Handbook and Participation Agreement relating to the plan.

Neither the State of Nebraska, the Trust, the Nebraska State Treasurer, the Nebraska Investment Council, First National Bank of Omaha, Oppenheimer nor State Farm, nor any of their respective affiliates, directors, officers or agents shall have any debt or obligation to any contributor, any beneficiary or any other person as a result of the establishment of the plan, nor will these entities assume any risk or liability for mutual funds in which the plan invests.

The State Farm College Savings Plan is subject to enrollment, maintenance, administrative and management fees and expenses.

Investors in the plan do not hold shares of the underlying funds directly, but rather shares in a portfolio of the plan.

The State Farm College Savings Plan (the "plan") is sponsored by the State of Nebraska and administered by the Nebraska State Treasurer. The plan is established in cooperation with State Farm VP Management Corp. ("State Farm"), the State of Nebraska, and OFI Private Investments Inc. (OFIPI), a subsidiary of OppenheimerFunds, Inc, pursuant to which State Farm offers classes of shares in a series of accounts within the Nebraska Educational Savings Plan Trust (the "Trust" and plan issuer) that are distributed by OppenheimerFunds Distributor, Inc. (OFDI and together with OFIPI, "Oppenheimer"). The Trust offers other accounts that are not affiliated with the plan.

The Nebraska State Treasurer serves as trustee of the plan; OFIPI serves as the investment manager, with the oversight of the Nebraska Investment Council; and servicing agent: OFDI serves as the distributor: First National Bank of Omaha serves as the program manager.

The State Farm College Savings Plan is not insured or guaranteed by State Farm, Oppenheimer, First National Bank of Omaha, the Trust, the State of Nebraska, the Nebraska State Treasurer, the Nebraska Investment Council, any of their respective affiliates, directors, officers or agents or any other entity.

Customized Portfolio Performance Benchmarks

The benchmarks for the Portfolios represent customized composites of market indices for the available Underlying Investments weighted by the relative target asset allocation for such Portfolio.

The Russell 1000® Growth Index measures the performance of the large-cap growth segment of the U.S. equity universe. It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.

Oppenheimer Value Fund Benchmark: The Russell 1000® Value Index

The Russell 1000® Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values.

Oppenheimer Main Street Fund® Benchmark: S&P 500® Index

The S&P 500® Index tracks the common stock performance of 500 large U.S. companies.

The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe. The Russell Midcap Index is a subset of the Russell 1000® Index. It includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership. The Russell Midcap Index represents approximately 31% of the total market capitalization of the Russell 1000 companies. The Russell Midcap Index is constructed to provide a comprehensive and unbiased barometer for the mid-cap segment. The Index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true mid-cap opportunity set.

The Barclays U.S. Aggregate Bond Index is an index of U.S. dollar denominated, investment-grade U.S. corporate government and mortgage-backed securities.

Federated U.S. Government Securities Fund 1-3 Years Benchmark: The Bank of America Merrill Lynch 1-3 Year Treasury Index

The Merrill Lynch 1-3 Year U.S. Treasury & Agency Index is a subset of The Bank of America Merrill Lynch U.S. Treasury & Agency Index, an unmanaged fixed income index that includes U.S. Treasury fixed income securities (direct sovereign debt of the U.S. Government) in the maturity range equal to one year and less than three years.

The iMoneyNet First Tier Institutional Index (Also known as the MFR First Tier Institutional Index) is a subset of the Money Fund Reports (MFR) All-Taxable universe consisting of funds managed to a "first-tier" standard and which are offered to institutions only. Portfolio Holdings of first-tier funds include U.S. Treasury, U.S. Other, Repos, Time Deposits, Domestic Bank Obligations, Foreign Bank Obligations, First Tier CP, Floating Rate Notes, and AssetBacked Commercial Paper. The Money Fund Report AveragesTM are published by iMoneyNet, Inc. (formerly IBC Financial Data), and reflect yields net of fees and expenses.

State Farm Bank®, Bloomington, Illinois, is a Member FDIC and Equal Housing Lender. NMLS ID 139716. The other products offered by affiliate companies of State Farm Bank are not FDIC insured, not a State Farm Bank obligation or guaranteed by State Farm Bank, and subject to investment risk, including possible loss of principal invested. Contact State Farm Bank toll-free at 877-SF4-BANK (877-734-2265). Callers who are hearing or speech impaired should dial 711 or use a preferred Telecommunications Relay Service.